Indian Oil Corporation Ltd (IOC) reported a massive 98.6% drop in net profit in the September quarter as refinery margins fell and marketing margins declined. | Photo credit: GN Rao

State-owned Indian Oil Corporation Ltd (IOC) on Monday (October 28, 2024) reported a massive 98.6% decline in its net profit in the September quarter, as refinery margins fell and marketing margins fell. decreased.

The company reported a standalone net profit of ₹180.01 crore in the July-September period – the second quarter of the current financial year 2024-25 – compared to a profit of ₹12,967.32 crore a year ago. year, according to a stock filing filed by the company.

Profit also declined sequentially, from a profit of ₹2,643.18 crore in the April-June period.

As refinery margins fell, the company also recorded under-recoveries on the sale of LPG, domestic cooking gas, at a government-controlled cost that was below cost.

For the six months ended September 30, IOC recorded an LPG under-recovery of ₹8,870.11 crore, according to the filing.

It earned $4.08 processing crude oil into fuels like gasoline and diesel, compared with a gross refining margin of $13.12 per barrel last year.

Pre-tax profits of downstream fuel retail companies fell to just ₹10.03 crore from ₹17,755.95 crore in July-September 2023.

Revenue from operations fell to ₹1.95 lakh crore in July-September from ₹2.02 lakh crore a year ago as international oil prices declined.

Later in a statement, IOC said it sold 21.931 million tonnes of petroleum products during the second quarter, compared to 21.941 million tonnes a year ago and 24.063 million tonnes during the April-June period.

Its refineries processed 16.738 million tonnes of crude oil, compared to 17.772 million tonnes in July-September 2023 and 18.168 million tonnes in April-June 2024, it said.

The company and other state-owned fuel retailers – Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) – had made extraordinary gains last year by maintaining prices of petrol and diesel despite a drop in costs.

The price freeze was justified in the name of recouping losses that HPCL and the two other retailers had suffered the previous year when they did not increase their retail prices despite rising costs.

The gains from the price freeze were eroded, with petrol and diesel prices reduced by ₹2 per liter each just before the general election was announced. This, combined with lower product cracks or margins on relatively stable crude oil prices, led to lower profits.

Cracks – the difference between crude oil as a feedstock and the price of the final product – have declined from 2022-2023 highs.